How To YieldBoost COP From 2.3% To 7.7% Using Options

Shareholders of ConocoPhillips (COP) looking to boost their income beyond the stock's 2.3% annualized dividend yield can sell the January 2018 covered call at the $50 strike and collect the premium based on the $3.65 bid, which annualizes to an additional 5.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.7% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but COP shares would have to advance 15.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 24% return from this trading level, in addition to any dividends collected before the stock was called.